Hughes ups first-lien spread; Hexion upsizes loan; Energy Transfer downsizes loan; CACI breaks

By Sara Rosenberg and Paul A. Harris

New York, May 11 - In the bank loan primary market, Hughes Network Systems LLC increased pricing on its first-lien term loan, Hexion Specialty Chemicals Inc. upsized its credit facility after downsizing its bond deal and Energy Transfer Co. downsized its term loan.

In the secondary, CACI International Inc.'s repriced term loan freed up for trading on Wednesday in the lower-par region. But really stealing the spotlight in secondary activity was an auction that took place for a portfolio containing both loans and bonds of par names.

Hughes Network Systems increased pricing on its $275 million seven-year first-lien term loan (B1/B) to Libor plus 325 basis points from original price talk of Libor plus 300 basis points, according to a market source. The tranche contains - and has since launch - 101 soft call protection for one year.

And, since the change in pricing was announced, talk is that "orders have been coming in pretty steadily," the source added.

Hughes $375 million credit facility also contains a $50 million six-year revolver (B1/B) and a $50 million eight-year second-lien term loan (B3/B) currently talked at Libor plus 650 basis points with call protection of 103 in year one, 102 in year two and 101 in year three.

JPMorgan and Bear Stearns are the lead banks on the deal, with JPMorgan the left lead.

The $325 million of term loan debt replaces the company's previously pulled $325 million offering of eight-year senior notes. The notes, which were tabled because of the back up in the bond market, had been talked late in the April 11 week at 9¾% to 10%.

Proceeds from the term loans are being used to help fund the transfer of Hughes Network Systems' assets to Hughes Network Systems LLC, a newly formed company that is 50% owned by SkyTerra Communications Inc. and 50% owned by The DirecTV Group.

The completion of this joint ownership transaction was actually announced in late April, meaning that the new credit facility was already funded but is now being syndicated.

The revolver is expected to be undrawn at closing.

Hughes Network Systems is a Germantown, Md.-based provider of broadband satellite networks and services.

Hexion upsizes

Hexion Specialty Chemicals increased the size of its seven-year term loan to $500 million from $440 million after downsizing its proposed bond offering to $150 million from $250 million, according to market sources.

Whether the Libor plus 225 basis points price talk on the term loan was changed with the upsizing, was unavailable prior to press time.

Hexion's facility also contains a $275 million six-year revolver talked at Libor plus 225 basis points with a 50 basis point commitment fee.

There is also a $200 million accordion feature contained in the credit agreement.

J.P. Morgan Securities Inc., Credit Suisse First Boston and Citigroup are joint bookrunners and joint lead arrangers on the deal, with JPMorgan Chase Bank also acting as administrative agent, Citigroup as syndication agent and CSFB as documentation agent.

The now $775 million credit facility (B1/BB-) along with the bonds are being obtained in connection with Apollo Management Group LP's acquisition of Bakelite AG from German chemical maker Ruetgers AG. Bakelite will be combined with Columbus, Ohio-based Borden Chemical Inc., which is already owned by Apollo, Resolution Specialty Materials Inc. and Resolution Performance Products Inc. to form a new company called Hexion.

In conjunction with the mergers, Hexion will come to market with an $800 million initial public offering of common stock.

Proceeds from the term loan will be used to repay portions of debt of the predecessor units that Apollo is forming into Hexion.

Revolver borrowings will be available for working capital and other general corporate purposes.

Within the revolver are a $30 million U.S. subsidiary swingline loan facility and a letter-of-credit subfacility of at least $150 million.

Energy Transfer downsizes

Energy Transfer reduced the size of its in-market seven-year term loan to $500 million from $700 million but left all other terms unchanged including the Libor plus 200 basis points price talk that the deal was launched with, according to a market source.

The downsizing was done so "the credit profile is a little more conservative for the operating company," the source said.

Proceeds will be used to pay a dividend to Energy Transfer Partners LP, a Tulsa, Okla.-based publicly traded partnership owning and operating a diversified portfolio of energy assets.

As a result of the downsizing, the amount of the dividend being paid is being reduced as well.

Citigroup and Goldman Sachs are the lead banks on the deal, with Citigroup the left lead.

Energy Transfer Co. owns the 2% general partnership interest in Energy Transfer Partners.

CACI breaks

CACI's repriced term loan B opened for trading at par 1/8 bid, par ½ offered on Wednesday and remained in that context throughout the session in relatively light trading, according to a trader.

The term loan B was amended to change pricing to Libor plus 150 basis points from Libor plus 200 basis points.

Banc of America Securities LLC was the lead bank on the repricing deal.

CACI is an Arlington, Va., provider of IT and network solutions.

Portfolio auction wins audience

Secondary players spent a lot of time Wednesday focusing on an auction for a $350 million portfolio that consists of about $300 million in loans and $50 million in bonds, according to a trader. The portfolio only contained par names.

Credit Suisse First Boston was the intermediary auctioning off the portfolio, the trader said, adding that he wasn't quite sure where the portfolio originated from.

Bank of America was the cover bid at around 101.2 - meaning they took second place. As to who actually won the auction, "they wouldn't disclose the winner. [I'm] hearing it's JPMorgan but I don't know," the trader added.

Calpine weaker on warning

Calpine Corp.'s second-lien term loan fell off by about two points on Wednesday as the company issued a liquidity warning in its 10-Q filing, according to a trader.

Also, putting some pressure on the paper was Calpine's announcement on Tuesday that it would be getting additional bank debt in the form of a new term loan for its Metcalf project.

Calpine's second-lien bank debt was quoted at 73 bid, 74 offered by one trader and 72 bid, 74 offered by a second trader. Both traders, however, placed the debt down by two points on the day.

On Wednesday, Calpine admitted in its 10-Q filing that it faces several challenges in satisfying debt obligations, and funding anticipated capital expenditures and working capital requirements over the next 12 months being that these cash requirements are expected to exceed unrestricted cash on hand and cash from operations.

The San Jose, Calif.-based energy company does have a liquidity-enhancing program in place but this program depends heavily on possible sales or monetizations of certain assets - a prospect that is not entirely favorable to lenders.

Also, affecting the second-lien paper was Calpine's Tuesday announcement that its indirect subsidiary, Metcalf Energy Center LLC, plans to get a new $100 million senior term loan - since this is just more bank debt being piled on to an already highly levered company.

Proceeds from the new term loan will be used to refinance Metcalf's existing $100 million non-recourse construction credit facility and complete construction of the Metcalf Energy Center power plant in San Jose, Calif.

Concurrent with the refinancing, Metcalf plans on selling $155 million of 51/2-year redeemable preferred shares

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.